Trading Outlook of Natural Gas as Temperatures Change

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Contents

Trading Outlook of Natural Gas as Temperatures Change

By Annie Reona | Tuesday, July 21st, 2020

On Monday, natural gas prices fell slightly, but losses stopped when temperatures began to climb higher than normal combined with a leaner inventory build. The cooler weather systems are expected to begin to move through the Northeast and US Midwest regions.

In August, natural gas traded at $2.827 per million British thermal units, a full 1.50% lower, the daily range shifting between $2.823 and $2.851. On Friday, the contract increased to $2.870 which closed the week out 3.6% higher.

NatGasWeather.com has predicted that the demand for natural gas will be higher than normal right now, but will continue to drop until Thursday and then rapidly increase again. This is due to the high temperatures across the Northeast and Great Lakes regions which will heighten the demand for natural gas for cooling purposes.

The southern and central regions of the United States are expected to continue under a high pressure system throughout the rest of July with highs expected to remain in the upper 90s to low 100s. In the southeast regions, the heat index will keep temperatures between 105 and 113 degrees Fahrenheit. This will increase the demand for cooling.

These same high temperature and high pressure system are also expected to hit the northeast and Great Lakes regions in the following weeks which will continue to increase the demand for natural gas to cool down homes. There will be some cooler systems in the northwest and northeast regions bringing cooler temperature, but most of the rest of the United States will be seeing above average temperatures.

At this point it is unclear as to whether or not these large high pressure systems will remain throughout the United States going into early August. If the high pressure system continues, there will continue to be an increased demand for natural gas to cool homes. If the pressure desists, then the temperatures may drop to the average temperature for that time of year.

Last Thursday, the Energy Information Administration (www.eia.gov) reported that the natural gas stockpiles in the United States increased by 99 billion cubic feet during the week of July 10 th . This was greater than the prediction made by analysts who estimated an increase of 95 billion cubic feet. This brought the total supplies of gas up to 2.1114 trillion cubic feet.

Due to the higher demand for cooling caused by the widespread warmer temperatures, experts believe that there will be a decrease in the supply levels for approximately 70 bcf, which is compared to 92 bcf last year. This is up compared to the average five-year gain of just 53 bcf. The build is expected to decrease in the coming weeks.

Natural Gas Intelligence is a leading daily provider of natural gas prices, natural gas news, and gas pricing data to the deregulated North American natural gas industry

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Natural Gas Futures Plummet on ‘Step Change’ in Temperature Outlook, Record Production

Natural Gas Futures Ease on Further Warming in Latest Outlooks

Natural Gas Futures Gain on Possible Shift to Cooler Temperatures

Natural Gas Futures Take Step Back as Weather Models Diverge; Cash Stays Strong on Current Cold

Natural gas futures opened the week at a steep discount as forecasts failed to predict the kind of sustained early-winter cold needed to offset ample supply. After gapping lower over the weekend, the December Nymex contract settled at $2.637/MMBtu, down 15.2 cents. January gave up 14.5 cents to settle at $2.728.

In the spot market, East Coast hubs rallied on potentially record-setting cold moving in this week, while the conclusion of pipeline maintenance in Oklahoma boosted prices at production-area hubs in the Midcontinent and West Texas; NGI’s Spot Gas National Avg. rallied 31.0 cents to $2.870.

Guidance Monday advertised a “material warmer shift in the pattern” that would bring a “step change” from frigid near-term temperatures to more seasonal conditions after this week, according to Bespoke Weather Services.

Given signs of continued production growth, “the market has made it clear that strong cold needs to stick around to support prices at levels we saw last week,” Bespoke said. “The ends of the model runs point to some uncertainty” for temperatures later this month, with the pattern in the Pacific looking “less favorable for cold” but with blocking developing on the Atlantic side that could “blunt some of the warmer influence from the Pacific side.”

Looking at the supply picture, production set a new record high over the weekend, with Lower 48 dry gas output totaling 94.32 Bcf/d on Saturday, topping the previous high of 94.11 Bcf/d recorded Nov. 3, according to estimates from Genscape Inc.

“Notable within this latest record high is that East production this past weekend came in below the prior 30-day average, primarily due to the 1.2 Bcf/d planned outage of the Nexus pipeline cutting off a key outlet for Ohio production,” Genscape senior natural gas analyst Rick Margolin said.

Potentially cutting into the recent uptick in output, cold weather this week raises the risk of freeze-offs, Margolin said.

“Temperatures took a sharp drop” Sunday night in the Rockies and northern Midcontinent, he said. “We are not seeing freeze-off impacts yet; however, cold weather impacts are likely this week given the forecast for sustained lower temperatures.”

Meanwhile, last week’s Commodity Futures Trading Commission (CFTC) data, reflecting trading activity as of last Tuesday (Nov. 5), pointed to further short covering, with managed money short positions shrinking by 72,718 contracts week/week and managed money long positions increasing by 10,777 contracts, according to analysts at Enverus.

“The extension of the previous week’s advances sent prices to the highest level since the end of February” when the front month set an intraday high of $2.905 last Tuesday, the Enverus analysts said. “From that advance, there was a steady amount of selling, and with the large gap opening” from $2.755 to $2.716 to start the week “offsetting the large gap last Monday, the trade has developed an ‘island top’ for traders to consider.

“With the flip in the weather forecasts, declines between $2.575 and $2.520 should occur in the coming weeks. Any reversals stronger than that will run into sellers at the gap formed” this week from $2.716 up to $2.755.

Temperature, Demand Records Possible

Spot prices surged along the East Coast Monday as forecasts showed near-record cold associated with Arctic air and wintry precipitation moving through the central and eastern Lower 48 this week.

In fact, conditions could prove chilly enough to set new November demand records, according to Genscape’s Margolin.

“With the potential for areas across the Midwest, East and South Central regions to set record lows for this time of year, our Lower 48 demand forecast rises well in excess of 100 Bcf/d,” the analyst said.

This aligns with the first 100 Bcf/d-plus demand days recorded for the 2020/19 winter. The 2020/16 winter didn’t see a 100 Bcf/d demand day until January, while the 2020/17 and 2020/18 winters each saw their first 100 Bcf/d-plus demand days in December, according to Margolin.

“The brunt of the cold will come Tuesday, which is driving our demand forecast to 108.5 Bcf/d,” he said. “Wednesday is also forecast to hit 108 Bcf/d, followed by 100 Bcf/d on Thursday. If the 108.5 Bcf/d mark is realized, it will represent a new record high for the month of November, topping the 108.1 Bcf/d monthly record set last year on Nov. 27.”

The National Weather Service (NWS) called for a mass of Arctic air settled over the northern and central United States to push south and east, resulting in abnormally cold temperatures for the Southeast and East Tuesday and into Wednesday.

“Much of the central and eastern United States will be enveloped in a region of much below-average temperatures over the next two days, along with potential for widespread record cold morning low temperatures and record low afternoon high temperatures,” the NWS said. “. An area of low pressure developing along the Arctic front over the Ohio Valley will push northeast into the northern Mid-Atlantic and New England” Monday night into Tuesday.

“Heavy snows are likely on the northern and northwest side of this low from western to northern New York state into northern New England. A large region of winter storm warnings are in effect across these areas, with snowfall accumulations of six to 12 inches likely to produce hazardous travel conditions.”

In the Northeast, Iroquois Zone 2 jumped $2.780 to $5.630, while Tenn Zone 6 200L shot up $2.595 to $5.565. Farther south, Transco Zone 5 rallied $1.345 to $4.155.

Annual testing at Tennessee Gas Pipeline’s Compressor Station 313 in Pennsylvania could cut about 335 MMcf/d of flows Tuesday, Genscape analyst Dominic Eggerman said.

“Operational capacity will be reduced from 783 MMcf/d to 388 MMcf/d,” Eggerman said. “Flows through the station towards the northern 200 mainline have averaged 723 MMcf/d over the past 30 days.”

Elsewhere, despite the frigid forecast, most Midwest hubs posted discounts Monday. Dawn eased 8.0 cents to $2.635. In the Midcontinent, Northern Natural Ventura slid 6.5 cents to $2.700. Meanwhile, as Natural Gas Pipeline Co. of America (NGPL) announced the conclusion of repairs at its Compressor Station (CS) 801 in Carter County, OK, NGPL Midcontinent shot up 59.5 cents to average $2.210.

NGPL had notified shippers that it would be installing a new permanent separator at CS 801 this month, restricting eastbound flows through Segment 15 of its Texok Zone for the first 11 days of November. The operator confirmed in a notice Monday that the restriction at CS 801 has been lifted.

Spot price action Monday suggested producers in both the Midcontinent and farther south in the Permian Basin enjoyed significant congestion relief from the return of the eastbound capacity through Oklahoma via NGPL’s system. Hubs throughout West Texas surged in Monday’s trading. Waha rallied 65.0 cents to $2.185.

During the NGPL maintenance, average prices at Waha went as low as 83.5 cents last Monday (Nov. 4), while NGPL Midcontinent prices set a recent low at 81.0 cents on the same trade date, Daily GPI historical data show.

Over on the West Coast, planned maintenance starting Tuesday could cut about 150 MMcf/d flowing into Southern California Gas (SoCalGas), primarily from Pacific Gas & Electric (PG&E), but SoCalGas could compensate by increasing imports from the Kern River and Mojave pipelines, according to Genscape analyst Joe Bernardi.

The maintenance will limit flows into SoCalGas through North Wheeler Ridge, representing interconnects with PG&E and Elk Hills, to 125 MMcf/d through Thursday. Flows through this location have averaged about 280 MMcf/d over the past 30 days, Bernardi said.

“When a similar one-day event took place in September, cutting about 375 MMcf/d day/day, receipts from the nearby Kern/Mojave interconnect increased by 289 MMcf/d,” the analyst said. “Past events have also seen storage withdrawals increase to make up for the lost imports, which can push up on SoCal Citygate basis.”

PG&E Citygate shed 12.0 cents to average $3.130 Monday, while SoCal Citygate climbed 49.5 cents to $3.985.

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Natural Gas Weekly Update

for week ending January 15, 2020 | Release date: January 16, 2020 | Next release: January 23, 2020 | Previous weeks

In the News:

U.S. net natural gas exports grow through 2021

The U.S. Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO), released on January 14, forecasts the United States to remain a net exporter of natural gas through 2021. Net natural gas exports are forecast to average 7.3 billion cubic feet per day (Bcf/d) in 2020 and 8.9 Bcf/d in 2021, a 3.6 Bcf/d increase from 2020. In 2020, the United States became a net natural gas exporter on an annual basis for the first time in 60 years.

Strong natural gas export growth in recent years is mainly the result of increased exports of liquefied natural gas (LNG). U.S. LNG exports averaged 5.0 Bcf/d in 2020, 2.0 Bcf/d higher than in 2020, as a result of several new facilities placing their first liquefaction units—referred to as trains—in service. This year, several new trains are expected to begin operations: Trains 2 and 3 at Cameron LNG in Louisiana, Train 3 at Freeport LNG in Texas, and six remaining Moveable Modular Liquefaction System (MMLS) units (Trains 5–10) at Elba Island in Georgia. In 2021, the third train at the Corpus Christi facility in Texas is scheduled to come online, bringing the total U.S. liquefaction baseload capacity to 10.2 Bcf/d. LNG exports are projected to continue to grow—averaging 6.5 Bcf/d in 2020 and 7.7 Bcf/d in 2021—as facilities gradually ramp up to full production.

EIA also forecasts that pipeline exports will continue to grow through 2021. Gross U.S. pipeline exports rise from 7.8 Bcf/d in 2020 to 8.1 Bcf/d in 2020 and to 8.5 Bcf/d in 2021.

U.S. pipeline exports to Mexico began increasing after expansions of cross-border pipeline capacity were completed. From January through October 2020, U.S. pipeline exports to Mexico averaged 5.1 Bcf/d, which is 0.5 Bcf/d higher than the 2020 annual average, according to EIA’s Natural Gas Monthly. This increase in exports was primarily the result of increased flows on the newly commissioned Sur de Texas–Tuxpan pipeline in Mexico, which transports natural gas from Texas to the southern Mexico state of Veracruz. Several new pipelines in Mexico that were expected to come online in 2020 were delayed and are forecast to enter service in 2020. These pipelines include the 1.2 Bcf/d La Laguna–Aguascalientes and 0.9 Bcf/d Villa de Reyes–Aguascalientes–Guadalajara pipelines in Central and Southwest Mexico and the 0.5 Bcf/d Samalayuca–Sásabe in Western Mexico. Once these pipelines come online, U.S. pipeline exports to Mexico are projected to further increase.

Although U.S. net natural gas pipeline imports from Canada have been steadily declining since 2020, the United States is projected to remain a net natural gas importer from Canada through the long-term because imports from Canada will remain a supply source for the United States during the winter. Despite new supplies from Appalachia that have been displacing pipeline imports from western Canada into the Midwest and an increase of U.S. pipeline exports to Canada following Phase 2 of the Rover pipeline and the NEXUS pipeline entering service in late 2020, the United States will continue to import more natural gas from Canada than it exports.

Overview:

(For the week ending Wednesday, January 15, 2020)

  • Natural gas spot price movements were mixed this report week (Wednesday, January 8 to Wednesday, January 15). The Henry Hub spot price fell from $2.08 per million British thermal units (MMBtu) last Wednesday to $1.98/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the price of the February 2020 contract decreased 2¢, from $2.141/MMBtu last Wednesday to $2.120/MMBtu yesterday. The price of the 12-month strip averaging February 2020 through January 2021 futures contracts declined 3¢/MMBtu to $2.290/MMBtu.
  • The net withdrawal from working gas totaled 109 billion cubic feet (Bcf) for the week ending January 10. Working natural gas stocks total 3,039 Bcf, which is 19% more than the year-ago level and 5% more than the five-year (2020–19) average for this week.
  • The natural gas plant liquids composite price at Mont Belvieu, Texas, fell by 2¢/MMBtu, averaging $5.05/MMBtu for the week ending January 15. The prices of natural gasoline, propane, and isobutane fell by 4%, 1%, and 1%, respectively. The prices of ethane and butane rose by 4% and 2%, respectively.
  • According to Baker Hughes, for the week ending Tuesday, January 7, the natural gas rig count decreased by 4 to 119. The number of oil-directed rigs fell by 11 to 659. The total rig count decreased by 15, and it now stands at 781.

Prices/Supply/Demand:

The Henry Hub spot price falls to less than $2. This report week (Wednesday, January 8 to Wednesday, January 15), the Henry Hub spot price fell 10¢ from $2.08/MMBtu last Wednesday to a low of $1.98/MMBtu yesterday, the lowest spot price since April 2020 and the lowest spot price for Henry Hub in January trading since 1999. Temperatures were much warmer than normal across most of the Lower 48 states, generally putting downward pressure on prices. At the Chicago Citygate, the price was unchanged from last Wednesday at $1.97/MMBtu.

California prices fall. The price at PG&E Citygate in Northern California fell 18¢, down from $3.32/MMBtu last Wednesday to a low of $3.14/MMBtu yesterday. The price at SoCal Citygate in Southern California decreased 39¢ from $4.80/MMBtu last Wednesday to a low of $4.41/MMBtu yesterday. Prices have been elevated in Southern California in recent weeks because of high demand and withdrawals from storage.

Northeast prices rise with forecasts of heavy snow. At the Algonquin Citygate, which serves Boston-area consumers, the price went up $1.55 from $2.91/MMBtu last Wednesday to a high of $4.46/MMBtu yesterday. Prices rose amid falling temperatures and forecasts of heavy snow for this weekend, reversing a trend of unseasonably warm temperatures during the report week. At the Transcontinental Pipeline Zone 6 trading point for New York City, the price decreased 1¢ from $2.17/MMBtu last Wednesday to $2.16/MMBtu yesterday.

The Tennessee Zone 4 Marcellus spot price increased 13¢ from $1.70/MMBtu last Wednesday to $1.83/MMBtu yesterday. The price at Dominion South in southwest Pennsylvania rose 8¢ from $1.71/MMBtu last Wednesday to $1.79/MMBtu yesterday.

Discount at Permian Basin trading hub persists. The price at the Waha Hub in West Texas, which is located near Permian Basin production activities, averaged $0.64/MMBtu last Wednesday, $1.44/MMBtu lower than the Henry Hub price. Yesterday, the price at the Waha Hub averaged $0.61/MMBtu, $1.37/MMBtu lower than the Henry Hub price.

Supply falls as the United States imports less natural gas from Canada. According to data from IHS Markit, the average total supply of natural gas fell by 1% compared with the previous report week. Dry natural gas production remained constant week over week. Average net imports from Canada decreased by 25% from last week with warmer-than-normal temperatures and lower demand in Midwest and Northeast markets.

Demand falls, primarily in power and buildings sectors. Total U.S. consumption of natural gas fell by 3% compared with the previous report week, according to data from IHS Markit. Natural gas consumed for power generation declined by 3% week over week. Industrial sector consumption decreased by 1% week over week. In the residential and commercial sectors, consumption declined by 4%. According to Genscape, natural gas exports to Mexico increased 5% as deliveries increased to Mexico’s Sur de Texas-Tuxpan pipeline at Brownsville, Texas.

U.S. LNG exports decrease week over week. Fourteen LNG vessels (seven from Sabine Pass; two each from Corpus Christi, Cove Point, and Cameron; and one from Freeport) with a combined LNG-carrying capacity of 51 Bcf departed the United States between January 9 and January 15, 2020, according to shipping data compiled by Bloomberg.

On December 30, 2020, the Federal Energy Regulatory Commission issued an order authorizing the developers of Elba Island LNG facility in Georgia to “commence service for liquefaction and export activities from the Moveable Modular Liquefaction System No. 4.” Elba Island LNG exported its first LNG cargo on December 13, 2020, and is in the process of commissioning the remaining Units 5 through 10 at the facility, scheduled to come online by mid-2020.

Storage:

The net withdrawal from storage totaled 109 Bcf for the week ending January 10, compared with the five-year (2020–19) average net withdrawal of 184 Bcf and last year’s net withdrawal of 82 Bcf during the same week. Working natural gas stocks totaled 3,039 Bcf, which is 149 Bcf more than the five-year average and 494 Bcf more than last year at this time.

The average rate of withdrawal from storage is 15% lower than the five-year average so far in the withdrawal season (November through March). If the rate of withdrawal from storage matched the five-year average of 14.7 Bcf/d for the remainder of the withdrawal season, the total inventory would be 1,846 Bcf on March 31, which is 149 Bcf higher than the five-year average of 1,697 Bcf for that time of year.

According to The Desk survey of natural gas analysts, estimates of the weekly net change to working natural gas stocks ranged from a net withdrawal of 87 Bcf to 106 Bcf, with a median estimate of 95 Bcf.

Natural Gas Price Fundamental Daily Forecast – Trader Reaction to $1.833 Sets the Tone

Profit-taking and position-squaring ahead of the release of the government’s weekly storage report is helping to pressure natural gas prices on Thursday. Traders are also shrugging off forecasts calling for milder temperatures while shifting their focus to tighter balances.

Natural Gas Intelligence (NGI) reported that Bespoke Weather Services said it’s possible the market would more easily “shrug off” what figures to be weak weather-driven demand ahead.

At 14:57 GMT, April natural gas is trading $1.812, down 0.015 or -0.92%.

U.S. Energy Information Administration Weekly Storage Report

This week’s estimates are indicating a near-average withdrawal from Thursday’s weekly EIA storage report.

A Reuters poll shows a withdrawal of 108 Bcf for the week-ended February 28, while a Wall Street Journal survey showed a 109 Bcf pull. Bloomberg estimates a median withdrawal of 110 Bcf. Traders anticipate this week’s pull to come in at 88 Bcf to 117 Bcf. NGI’s model predicted a 106 Bcf withdrawal.

Last year, EIA recorded a 152 Bcf withdrawal for the similar week, and the five-year average pull of 106 Bcf.

Short-Term Weather Outlook

NatGasWeather for March 5-11 says, “A weather system with heavy showers will track across the South and Southeast the next few days, although with only modest cooling as highs still reach 50s to 70s. The northern US remains milder than normal with highs of 40s and 50s, locally 30s.

However, a quick cold shot will sweep across the Midwest and East Friday through Saturday with lows of 10s to 30s for a modest bump in national demand. Mild conditions with highs of 40s to 80s will return to rule most of the US late this weekend through next week for a return to very light demand. Overall, light versus normal demand the next 7-days, just slightly better Friday through Saturday.

Daily Forecast

The main trend is down. Its range is $2.024 to $1.642. The retracement zone of this range is $1.833 to $1.878. This zone is the primary upside target. It was tested early today when the market surged into $1.847. Sellers came in to stop the rally.

The new short-term range is $1.642 to $1.847. Its retracement zone at $1.744 to $1.720 is the new downside target area.

Based on the early price action, the direction of the April natural gas market will be determined by trader reaction to the 50% level at $1.833.

A sustained move over $1.835 will indicate the presence of buyers. This could trigger a surge into $1.847 then $1.878.

A sustained move under $1.833 will signal the presence sellers. If this move creates enough downside momentum then look for the selling to possibly extend into $1.744 to $1.720

Natural Gas Intelligence is a leading daily provider of natural gas prices, natural gas news, and gas pricing data to the deregulated North American natural gas industry

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Henry Col. Gas Chicago
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Volatility continued in the natural gas futures market Thursday as traders were left to weigh the inherent uncertainty of the escalating coronavirus pandemic against a fundamentally more bullish supply outlook. The April Nymex contract traded as high as $1.883/MMBtu and as low as $1.750 before going on to settle at $1.841, down 3.7 cents.

In the spot market, Western U.S. hubs gave back some of their gains from the previous session as NGI’s Spot Gas National Avg. sank 14.0 cents to $1.605.

Natural gas had been in a steady downtrend throughout the winter months driven by mild weather and a supply glut, but that changed this week as the market recognized the potential upstream impacts of the collapse in crude prices, according to Powerhouse Vice President David Thompson. The drop in oil prices “changes the baseline assumptions” for the market moving forward.

“This has been a very interesting week in natural gas, even though everybody’s been focusing on crude oil,” Thompson told NGI. “The natural gas story could be about to enter a different chapter in that we might have something coming to potentially reduce supply.”

Even after declines over the past two sessions, as long as prices stay above $1.770 for the front month it will represent a pause in the downtrend, which stretches back to November, according to Thompson.

As for the potential demand shocks from the coronavirus outbreak, Thompson said the impact on natural gas is not clear-cut, at least not in the same way that reduced travel will have a direct hit on oil demand, as one example.

“I’m not sure coronavirus is a prime driver for natural gas,” he said. “What might be an issue for natural gas is more” oil production from the Organization of the Petroleum Exporting Countries leading to more associated gas entering the global market. “Domestically speaking, if you have some reduction in economic activity you might have some reduction in commercial and industrial gas demand in the U.S.,” but this wouldn’t compare to the impacts on crude.

Meanwhile, the Energy Information Administration (EIA) Thursday reported a lighter-than-expected 48 Bcf weekly withdrawal from U.S. gas stocks, prompting a mixed response from futures.

Major surveys had pointed to a withdrawal in the mid- to upper-50s Bcf, putting the actual figure well to the bearish side of expectations. The draw also is much smaller than historical norms. The actual withdrawal was much smaller than both last year’s 164 Bcf pull for the similar week and the five-year average withdrawal of 99 Bcf.

During a discussion on energy-focused social media platform Enelyst, EBW Analytics Group analyst Eli Rubin said the firm’s latest estimates show inventories at 3.9-4.0 Tcf for the end of the 2020 injection season.

There are “huge uncertainties depending on how fast producers can react and slow production and on how much” liquefied natural gas (LNG) gets exported, Rubin said. “But many risks are to the downside” in terms of prices.

Enelyst managing director Het Shah said there are currently offsetting factors affecting end-of-summer inventory expectations.

“Any drop in production from lower prices is being offset by lower LNG exports,” Shah said.

Prior to the report, a Bloomberg survey had shown a median 56 Bcf pull, while a Reuters poll had landed on a withdrawal of 59 Bcf. NGI’s model had predicted a 51 Bcf withdrawal for the report, which covers the week ended March 6. Estimates had ranged from minus 49 Bcf to minus 66 Bcf.

Total Lower 48 working gas in underground storage stood at 2,043 Bcf as of March 6, 796 Bcf (63.8%) higher than year-ago levels and 227 Bcf (12.5%) above the five-year average, according to EIA.

By region, the Midwest withdrew 29 Bcf week/week, while the East pulled 25 Bcf. The Mountain region saw a 4 Bcf withdrawal, while the Pacific injected 3 Bcf. The South Central injected 7 Bcf during the period, including 6 Bcf into salt stocks and 1 Bcf into nonsalt, according to EIA.

The palpable sense of anxiety over the coronavirus pandemic, which had equity markets swooning Thursday, made parsing the natural gas market’s attitudes about the weather and storage outlook more difficult.

Changes to the latest forecast guidance didn’t seem to have any correlation with intraday gains following the EIA report, according to NatGasWeather.

“Recent weather trends have been a little cooler across the northern U.S. for early next week but milder over much of the country March 18-23 by showing less subfreezing air over Canada pushing across the border,” NatGasWeather said. “No changes overall, with weather patterns exceptionally bearish this week, better this weekend into early next week. but then back to being too mild for most of the country by the middle of next week through March 25.

“. As we’ve been mentioning, it’s been rather difficult to know exactly how much weather patterns have been influencing prices due to huge moves in oil, gold and equity markets every hour, and that’s likely to continue into the Friday close.”

Western Cold Front

The volatility in the futures market appeared to spill over into spot trading Thursday, with prices posting sizeable discounts after two straight days of widespread gains. Henry Hub dropped 10.0 cents to $1.820.

Hubs throughout the Western United States retreated despite forecasts showing a drop in temperatures for major cities throughout the region heading into the weekend. Genscape Inc. called for a “moisture-laden cold front” moving into the Pacific region to boost demand over the next few days.

Day-time highs in cites including Seattle, Los Angeles, Phoenix and Denver could see large swings lower over a 24-hour period associated with this system, according to the firm.

“The system is also expected to drop hefty amounts of moisture,” Genscape senior natural gas analyst Rick Margolin said. “Coastal areas are expected to receive as much as 10 inches of rain over the next five days. This rain may erode some of the bullish impacts of the event by triggering an uptick in hydro generation, a situation that could be exacerbated by regional reservoirs being forced to spill since many are already at or above normal levels.”

Demand across the areas included in EIA’s Pacific and Mountain storage regions is expected to reach a 10-day peak of 16.8 Bcf/d by early next week, according to Genscape.

“Based on forecast temperatures through Monday we expect to see Pacific Northwest demand rise close to 3 Bcf/d, a level that has been breached just one day this calendar year,” Margolin said. Regional demand in Southern California is expected to surpass 4.2 Bcf/d.

Still, after strong gains in the previous session, spot prices eased lower throughout the Rockies and California Thursday. Northwest Sumas shaved off 8.5 cents to average $2.090, while SoCal Citygate eased 4.5 cents to $2.350.

Farther upstream in West Texas, heavy discounts were the norm, including a 31.0-cent drop at Transwestern, which finished at 85.5 cents.

The recent gains in forward trading in West Texas likely stem more from the rout in WTI prices — and a potential resulting drop in associated gas output — than from any change in the outlook for new gas takeaway capacity out of the Permian Basin, according to Genscape.

“We do not believe recent Waha gas price action is tied to any major infrastructural changes, like the anticipated in-service of Wahalajara,” Margolin said. “. We do expect Mexico’s Wahalajara pipeline to begin service sometime this month, which will provide about 1 Bcf/d of new takeaway capacity out of the constrained Permian Basin. However, we do not see any signs yet that the system has begun operations.”

Elsewhere, hubs throughout the Gulf Coast, Southeast, Midwest and Northeast recorded discounts of around a dime or more. Northern portions of the country continued to experience mild conditions Thursday, while the South enjoyed “warm highs” in the 60s to 80s, according to NatGasWeather. Overall, conditions to close out the work week were expected to result in “very light national demand” amid sparse coverage of truly chilly temperatures.

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